From Vision to Action Plan The Balanced Scorecard Approach

What is a Balanced Scorecard?

A Balanced Scorecard is a framework that focuses on shareholder, customer, internal and learning requirements of a business in order to create a system of linked objectives, measures, targets and initiatives which collectively describe the strategy of an organization and how that strategy can be achieved.

What is a BSC?
BSC is not a dash-board of financial and non-financial indicators. new/re-hashed measurement system. BSC is a tool to convert a strategy into action.

Balanced Scorecard - Concept

FINANCIAL PERSPECTIVE
To succeed financially, how should we appear to our shareholders (Corporate Management)?

CUSTOMER PERSPECTIVE (EXT.)

To achieve our mission, how should we appear to our customers?

BUSINESS PROCESS PERSPECTIVE (INT.)

To satisfy our shareholders & customers, what business processes must we excel at?

RENEWAL, LEARNING, GROWTH PERSPECTIVE

To achieve our mission, how will we sustain our ability to change & improve?

Balanced Scorecard - Concept

Financial
Objectives Measures Targets Initiatives

"To succeed financially, how should we appear to our shareholers?"

Customer
"To achieve our vision, how should we appear to our customers?"
Objectives Measures Targets Initiatives

Internal Business Processes

Vision & Strategy
"To satisfy our sharholeders & customers, what business must we excel at?"
Objectives Measures Targets Initiatives

Learning & Growth

Objectives Measures Targets Initiatives

"To achieve our vision, how will we sustain our ability to change and improve?"

BSC & Strategy?

A strategy is a set of hypotheses about cause and effect. Any system such as BSC should tell the story of the BUs strategy. It should make explicit the sequence of hypotheses about the cause-and-effect relationships between various action the BU proposes to take. Every element selected for a BSC should be an element in a chain of cause & effect relationship that communicates the meaning of the BUs strategy.

-Hope is not a strategy

Financial

ROCE

Customer Loyalty
Customer On-time Delivery

Internal/ Business Process

Process Quality

Process Cycle Time

Learning and Growth

Employee Skills

Illustrative Strategy Map - Software Services Company

Financial
F2
Improve onsite project profitability

F1

Become a leading software solutions company by 2003

F5
F4
Develop new customer / market revenues

Reduce resource costs and improve margins

F3
Develop offshore revenues

Customer
C1
SoftCo understands my specific needs and provides appropriate services

C2
SoftCo provides solutions globally

C3
Softco delivers on time & provides high quality services

Internal
I1
Implement resource utilization processes

I5 I2
Expand product/ services portfolio & develop a roadmap

I3
Mange customer relationship

I4

Develop lead generation capability

Optimize business processes

Learning & Growth

L1
Clearly define Organization Structure Roles & responsibilities

L2
Improve manpower quality by training, redundancy and recruitment

L3
Implement performance management system

Strategy Map (Strategic Linkage Model)

Financial
Drive Increased Demand Profitable Sales Growth Improve Stakeholder Value Cost Efficiency

Customer
Best value for money The leading and Most innovative brand Preferred Business partner Partners see us value adding Strong relationships with supply chain

Market development activities

Develop new channels and segments Expand through new concepts Develop category management

Brand Building

Implement best practices

Improve business information and control

Internal
Creating preferred organization
Core skills and knowledge Management Capabilities Common systems and processes Culture and attitude change Knowledge Sharing

Learning & Growth

BSC Organisation
Vision Mission

Themes Objectives

4 Perspectives
Initiatives

Measures

Feedback & Learning

Accounts Receivable FINANCIAL Operating expenses

Return on Capital employed

CUSTOMER

Customer Satisfaction

INTERNAL BUSINESS PROCESS

rework

LEARNING AND GROWTH

Employees Morale

Employees Suggestions

Echo Engineering Linking Measurements from Four Perspectives

BSC Components
Statement of what strategy must achieve and what is critical to its success How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives

Objective
Financial

Measure Revenue mix

Target 10% Product X 40% Product Y 50% Product Z 95%

Initiatives

Broaden revenue mix Increase customer satisfaction

Customer

Customer retention

Frequent Buyers Club

Internal

Cross-sell our products

% Revenue from new products

2001
2002

15%
50%

Customer Mailing Segmentation Product Training

Learning & Growth

Develop strategic skills

Skill coverage

90%

Business Execution
Quality Projects, Activities, etc. Marketing Projects, Activities, etc.

1 Identify Initiatives

Development Projects, Activities, etc.

Corporate Projects, Activities, etc.

Financial Perspective

2 Screen Initiatives

Customer Perspective Internal Perspective Organization Learning

Output: Short List of Strategically Aligned Initiatives

Strategic Alignment
Step 1. A Corporate Scorecard defines overall strategic priorities and context Step 2.

Corporate / Group

Each SBU develops a long-range plan and BSC consistent with the corporate strategic agenda

SBU A

SBU B

SBU C

Support Functions

Step 3. Each Support Unit develops a scorecard to support the internal customers

Step 4. Departments, teams and individuals develop scorecards consistent with their organizations strategy

Teams and Individuals

Digital Scorecard
DIMENSION MISSION Lead the Industry rate of growth No 1 in profit in Industry Global Thrust Trusted Partner Reliable & Cost effective Solutions/ services Customer acquisition/expansion Top 3 preferred employer Learning Organisation Digital way Technology Excellence Introduction of new Solutions/Services World Class Products Best in Class Organisation Business & Service /Product delivery Excellence Quality Leadership

MC

BUSINESS

CUSTOMER

Sales/ Delivery HR

PEOPLE

TECHNOLOGY

CIO

Quality

PROCESSES

DIMENSION
BUSINESS

MISSION
Lead the Industry rate of growth No 1 in profit in Industry Global Thrust

STRATEGIC OBJECTIVES ( 2002 03 )

Greater offshore delivery/annuity business Ensure success of TSCC & Products Offset pricing pressures through increased productivity Develop Verticles Increased non parent business Penetrate existing accounts Re-energise Office of the Customer Year of the Employee Capability Development/Certifications Employee creativity/innovation & productivity Values as a way of life

OVERALL MEASURES/GOALS
Overall Revenue PAT Offshore Gross Margins Products & TSCC Minimum- Verticles to be developed Customer Satisfaction Scores Existing Customer Growth Non-HP Digitell Scores Retention Rate Utilisation Focus on employee creativity/innovation

CUSTOMER

Trusted Partner Reliable & Cost effective Solutions/ services Customer acquisition/expansion Top 3 preferred employer Learning Organisation Digital way

PEOPLE

TECHNOLOGY

Technology Excellence Introduction of new Solutions/Services World Class Products

Incubate & develop new services based on emerging technologies Develop Solutions based on Standards/Tools/Frameworks/Methodologies Leadership in Technology Forums/Consortiums Strategic Alliances with leading Platform Vendors Product Road Maps for Product success
New all around quality drive through `Service Excellence External Accreditations Automation/tools for enhanced effectiveness

-% of business through new services - patent applications filed Tech up gradation training -% increase in certifications -% increase in Bid/Win ratio

PROCESSES

Best in Class Organisation Business & Service /Product delivery Excellence Quality Leadership

Digital API 100% of the identified units CMM Level 5/PCMM Process Improvement Plan Implementation Institutionalized use of tools and technologies

HR.
DIMENSION OVERALL MEASURES/GOALS

BUSINESS

Non Performers Identification & Management Utilisation Retention Referral Program Scalability Internal training & learning initiatives HR Services Responsiveness SLAs Communication Matrix Employee welfare initiatives
Employee Satisfaction Digital way Initiatives Training & Development

CUSTOMER

PEOPLE

TECHNOLOGY

e HR PMS, Leave, ESOP, T&D

PCMM Level 5 Inter-linkages with other Quality initiatives Reporting Matrix

PROCESSES

Execution Calendar
ACTIVITIES
Consolidating feedback and seeking inputs Blue Print Finalisation MC Scorecard - Individually SMT Scorecards Goal setting entire organisation Review for MC/SMT

TARGET DATES
Jan/Feb 25th April 15th May 1st June 20th June 30th June 30th September 31st December 30th September

RESPONSIBILITY
Task Force Board/MC MC Team SMT All Managers MC/SMT/Task Force

Performance Reviews

All Managers

Final Evaluation/Feedback Close & Initiate Next Year process

April/May May/June

Board/MC MC/Task Force

Different Types of Measures (Targets) Outcome Measures or Lag Indicators Performance Drivers or Lead indicators

Balanced Scorecard at National Insurance

Strategic Measuremnts Strategic Objectives
Lag Lead

Financial

Return-on-Equtiy F1 - Meet Sharholder Expectations Combined Ratio F2 - Improve Operating Performance Business Mix F3 - Reduce Sharholder Risk Catastrophic Losses F4 - Reduce Sharholder Risk

Customer
C1 - Improve Agency Performance C2 - Satisfy Target Policyholders

Acquisition / Retention (vs.plan) Acquisition / Retention (by segment) Business Max (by segment) Loss Ration Calims Frequency Claims Serverty Expences Ratio

Agency Performance (vs.plan) Policyholders Satisfaction Survey Business Development (vs. plan) Underwriting Quality Audit Claims Quality Audit Headcount Movement Managed Spending Movement

Internal
I1 - Develop Target Markets I2 - Underwrite Profitably I3 - Align Claims with Business I4 - Improve Productivity